I heard this interview on ABC’s “The World Today” on Tuesday and have been hanging out for the entire interview to be popped up…
The World Today – Tuesday, 20 May , 2008 12:42:00
Reporter: Eleanor Hall
Her new book, “Rogue Economics” attempts an even bigger challenge – to unravel what she describes as the rogue forces driving global capitalism. Her book describes, among other things, a massive explosion in slavery since the end of the Cold War and it shows how the subprime crisis is a product of this new world economy.
Perhaps most controversially she suggests that Islamic finance is the key to challenging rogue economics.
Loretta Napoleoni is in Australia this month for the Sydney Writers Festival and she joined me in the World Today studio this morning.
Loretta Napoleoni thanks very much for joining us.
LORETTA NAPOLEONI: Why thank you for inviting me.
ELEANOR HALL: Now you coined the phrase “rogue economics”, what exactly does it mean?
LORETTA NAPOLEONI: Well, rogue economics is purposely ambiguous because it is a sort of umbrella under which you do find the terror economy, the criminal economy, the illegal economy but also the formation of grey areas. These are areas where there is no regulation. There is no law and inside this grey areas, the globalisation outlaws as I defined this new rogue entrepreneurs that reap the benefit of the great transformation of today which is globalisation.
ELEANOR HALL: A lot of these are sort of Mafioso type figures?
LORETTA NAPOLEONI: Yes, but also individuals who are not necessarily breaking any law. For example the subprime mortgage crisis. It is very much the product of rogue economics. Nobody really broke any law because there were not any laws to be broken.
ELEANOR HALL: The subprime crisis then is a direct consequence of rogue economics?
LORETTA NAPOLEONI: Yes it is. If you look at how the crisis came about, it came about through the transformation of a growing debt into an asset and that was made possible by the usage of derivatives. Basically applying this derivatives to mortgages was possible to transform this debt into an asset and sell the debt as an asset across the world.
There was no regulation in place to prevent something like this to happen.
ELEANOR HALL: I want to mention now one of the startling links that you draw. You say that there is a link between democracy and slavery. What is this link?
LORETTA NAPOLEONI: Well, basically we see that as democratic countries multiply, why this process happen, slavery start rising. By the end of the 1990s we had 27 million people who were actually slaves in those countries which had undergone the process of democratisation.
ELEANOR HALL: And you are not talking about wage slavery. You are talking about slavery like the sort of slavery trade we saw a couple of centuries ago, aren’t you?
LORETTA NAPOLEONI: Yeah, I’m talking about real slavery people who are deprived of their freedom. People who are trading as merchandise. Now the first sign of this resurgence came actually right after the fall of the Berlin Wall when women from the former Soviet bloc were started to be traded as sex slaves and prostitutes in the west.
ELEANOR HALL: Who was doing the trading?
LORETTA NAPOLEONI: Well predominantly it was the Mafia. Initially, but then other organisations got involved so to a certain extent it is poor people enslaving other poor people and with the food crisis now hitting really hard, we will, for sure see another surge in the number of slaves.
ELEANOR HALL: Now Islamic finance. Interestingly you say that it is the sole global economic force that can challenge rogue economics. Why?
LORETTA NAPOLEONI: Because it has a built-in code of ethics which we do not have anymore in western finance and this code of ethics comes from the Sharia law. Now when we say Sharia law people tend to associate it with something negative now we’ve got to explain that the Sharia law is nothing to do with the manipulation which has been done of this law by people like Osama bin Laden and the fundamentalists of Islamic.
Sharia law code of ethics which is very similar to the code of ethics of the classic British economist Adam Smith, David Ricardo. For example, money should not produce money. Money should be invested in the real economy and through the growth of the real economy, produce money.
So that is a fundamentally important concept which we have lost to a certain extent. The subprime crisis, it is created by an instrument which is based upon lending money that creates money.
ELEANOR HALL: So instead of a clash of civilisations, we essentially have a clash between rogue economics and Sharia economics?
LORETTA NAPOLEONI: Yes, that is a very good point. We do have a clash between rogue economics and Sharia economics whereby Sharia economics is the only force today that will be able to control rogue economics and bringing back within the rules providing, of course, Islamic finance does not fall into the hands of radical groups as you know al-Qaeda and Osama bin Laden.
ELEANOR HALL: Well, that is a pretty big risk isn’t it?
LORETTA NAPOLEONI: I don’t think it is a very big risk. Actually I think today the risk is much, much less than it was right after 9-11.
ELEANOR HALL: Essentially, we will be seeing a massive shift in values away from the individual and of wealth, won’t we?
LORETTA NAPOLEONI: I don’t think that the shift in value will be away from the individual. No, I would say that the individual, especially when we talk about Islamic finance will be more involved in the every day decision in terms of how is this money invested but there will be a new system and the west, in particular the core of the western system which is the US and the UK today, will be at the periphery of the new world.
ELEANOR HALL: Loretta Napoleoni, thanks very much for joining us.
LORETTA NAPOLEONI: Thank you.
ELEANOR HALL: That is Italian journalist and economist, Loretta Napoleoni who is in Australia for the Sydney Writers Festival. And if you’d like to hear a longer version of that interview, you can go to our website at abc.net.au.